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- TIA EXAM 5 - FRIEDLAND CH 16
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What is DCC?
Defense and cost containment
Includes all defense litigation and medical cost containment expenses
What is A&O?
Adjusting and other
Includes all claim adjusting expenses
What are the key factors on whether development methods can be used for adjustment expenses?
If sufficient detail is available such that data can be organized by AY (or PY, UW Y,or RY)
If the expenses tend to track accident (PY, UY,RY) or are more dependent on CY
Describe the Multiplicative approach for the Ratio of paid ALAE-to-paid clm dvmt
Project ultimate claims (using appropriate technique - text uses paid & rpt dev)
Develop ratio of paid ALAE-to-paid claims to ultimate
Ultimate ALAE = Ultimate Claims * Ultimate Ratio of paid ALAE-to-paid claims
What is the assumption with the multiplicative approach for ALAE?
Relationship btwn ALAE & Clms is relatively stable over experience period
List 3 Adv and 2 Disadv of Multiplicative ALAE approach
Advantages
1. Recognizes the relationship between ALAE and claims
2. Ratio development factors tend not to be as highly leveraged
3. Easy to interject actuarial judgment in projection analysis
Disadvantages
1. Any error in estimate of ultimate claims could affect estimate of ultimate ALAE
2. For some lines, large amounts of ALAE may be spent on CNP
Important to review large claims and maybe project estimates separately
Describe the Additive approach for the Ratio of paid ALAE-to-paid clm dvmt
1. Project ultimate claims (using appropriate technique - text usespaid and rpt dev)
2. Develop ratio of paid ALAE-to-paid claims to ultimate
**Take differences between ratios at successive ages and select
**Age-to-ultimate factor is then the cumulative sum from age to ultimate
3. Ultimate ALAE = Ultimate Claims * Ultimate Ratio of paid ALAE-to-paid claims
What is an advantage of additive ALAE approach?
More stable approach when ratios are very small at early maturities
Author
CDP
ID
76679
Card Set
- TIA EXAM 5 - FRIEDLAND CH 16
Description
FRIEDLAND CH 16
Updated
2011-04-02T00:48:32Z
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